Student Loan Forbearance – The End of the Road

·         Mortgage Rates¹ – Very little economic news was released this week with the focus instead on a parade of fed speakers who have provided their views on recent economic data.  Several Fed members have intimated they might be ready to hit ‘pause’ again for September, based on signs that the economy is slowing down.  The Fed’s Beige Book was released, which attempts to characterize the change in economic conditions since the last report, and showed consumers may have exhausted savings and are relying on borrowing, job growth was subdued, and price growth has slowed.  All of this should be good for rates going forward, but in the short term we did see our benchmark rate inch up to 7.250% (APR 7.363%).

·         Weekly Market Data² – As is typical with holiday weekends, buyer activity slows down and this past Labor Day weekend was no exception.  We saw only 127 of the 917 new listings go under contract last week (a relatively low 14% going under contract in the 1^st week on the market) and our Median Days on Market increased to 14 days.  Active listings had a slight increase to 6,681, of which 38% have been on the market less than 30 days, 39% have been on for 31-90 days the remaining 23% have been sitting over 90 days.  The market has clearly cooled, we’ll see if the trend continues into the fall. (Source: REColorado, all DMAR counties, this past week -Thursday to Wednesday).

·         Columbine Team Insight – We again had 75% of offers accepted at an average of 2% below list price, including seller concessions.  Most people who are currently selling have low interest rates and, unless they have a time-sensitive reason for moving, are pretty shy about taking large price reductions to get their home sold.  With the double whammy of higher purchase prices and higher mortgage rates, they are counting on the equity in their home to help them bridge the gap.  In this environment, we do not anticipate sellers significantly lowering their prices, effectively putting a floor under the market as they ride it out – waiting to see if willing buyers emerge over the next few months.

·         Market Trends – September 1^st was the official end to the US Department of Education’s COVID-19 student loan deferment program, which means interest accruals will resume and payments will again be due beginning in October.  This will not be a welcome change for those saddled with student loan debt and will compound the challenge of buying a home on top of already high mortgage and credit card rates.  There is, however, hope that you might be able to lower your monthly student loan payment with an Income-Driven Repayment Plan.  These plans set your monthly student loan payment at an amount that is intended to be affordable based on your income and family size.  There are four plan options with monthly payments ranging from 10% to 20% of discretionary income.  Under all four plans, mechanisms are available to have any remaining loan balance forgiven at the end of the repayment period, but you need to be diligent and understand the eligibility criteria.  If your buyers have federal student loans, these plans can make a substantial difference in their mortgage qualification and are definitely worth exploring.

NOTES:

(1)     The mortgage loan scenario presented assumes the purchase of a primary residence, excellent credit, an 80% loan-to-value (LTV), a loan amount of $480,000, a 30-year fixed interest rate of 7.250%, and a P&I payment of $3,274.  The Annual Percentage Rate (APR) is 7.363% with a 0.125% discount fee ($600).  Monthly principal and interest payments, which will continue for the stated term until paid in full, do not include mortgage insurance, property taxes or homeowners’ insurance premiums and actual monthly payments may be higher.  Interest rates are current as of 09/07/2023 and are subject to change at any time without notice.  All loans are subject to credit approval.  Other terms and conditions may apply.  Not all loans or products are available in all states. Regulated by the Colorado Department of Regulatory Agencies, Division of Real Estate.

(2)     Source: REColorado®, Inc for the period 08/31/2023 to 09/06/2023.   Data for Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, and Park counties. This representation is based in whole or in part on content supplied by REColorado®, Inc. and REColorado®, Inc. does not guarantee nor is it in any way responsible for its accuracy. Content maintained by REColorado®, Inc. may not reflect all real estate activity in the market.